Abstract

The dissertation Behavioral Finance Strategic Application in Risk Investment - Based on the Chinese and European Financial Market mainly discusses the two concepts of behavioral finance - momentum strategy and mental accounting. We tried to explain the investors psychology by the perspective of behavior finance, analyzed the characters of the Chinese stock market and the European stock market, then designed optimized investment portfolios between profits and investment risks. By testing the investors risk appetite, we tried to find momentum strategy that was appropriated to the profile of investors risk tolerance and profit expectation. We used the data of all 300 listed companies of HUSHEN 300 Index and all listed companies of EUROSTAXX 600 Index during a 10 year period (2005-2015). We analyzed the difference of market efficiency of these two markets, designed differenced momentum investment portfolios for each of them. By using a 10 year period (2005-2015) data set of these two stock markets, we proved that the Chinese stock market was an inefficient market and the European stock market is a efficient market. Comparing with the European investors, the Chinese investors are less rational. After separating the 10 year period to bull market period, bear market period and normal market period, we designed multivariate momentum model with different investment periods and discovered that short term investment period is more suitable to the Chinese stock market and the middle investment period is more suitable to the European stock market. It also meant that the price volatility of the Chinese stock market is higher than the European stock market in a short period, which provided an arbitrage opportunity to investors of the Chinese stock market...